The Possum Transport Company produces bikes, skates and mopeds. Mopeds are not as popular as they used to be, and the company is considering dropping this product. Possum currently sells 10000 mopeds per year for \(\$ 40\) each. Variable manufacturing and selling costs total \(\$ 34\) per moped. Fixed costs of \(\$ 90000\) can be avoided if mopeds are not produced.

Required:

Prepare an analysis to answer each of the following independent questions.

a Given this information, by how much would Possum's profit increase if production of mopeds is discontinued?

b If Possum can increase the sales volume of mopeds to 12000 units per year by spending an additional \(\$ 20000\) per year on advertising, should Possum continue moped production?

c If Possum can increase the sales volume of mopeds to 14000 per year by reducing its selling price to \(\$ 38\) per moped, should Possum continue moped production?